Tag: Synchrony Financial

With competition for the consumer’s disposable dollars heating up in the home improvement retail sector, more floor covering dealers are relying on credit programs to gain an advantage. These financing options not only provide consumers with more flexibility in making their purchases, but they also open the gateway to bigger tickets for floor covering retailers.

According to a recent study by Synchrony Financial—which offers credit programs for retailers and consumers—91% of flooring cardholders said financing made the purchase of big-ticket items more affordable. What’s more, 39% said they wouldn’t have made the purchase or would have gone to another merchant if financing was not available.

For dealers such as Greg Miller, president, Henry’s Floor Covering, Greencastle, Pa., offering credit to consumers is a no-brainer. The flooring store offers two credit options: six months and 12 months. “Our customers find with credit options they can upgrade to better products, do their complete project instead of having to do the project in phases and don’t have to rely completely on their savings. And, at the end of the project we’re paid in full.”

Those who choose to offer credit solutions have found the benefits are mutual for both consumers and retailers. Barrington Carpet, Akron, Ohio, offers its customers 12-month, no-interest credit options from both Mohawk and Shaw. Providing the shopper with various credit solutions, according to the company, helps close sales as well as bring customers into the showroom. “Offering credit is a must in attracting consumers into the flooring market,” said Craig Phillips, president. “Flooring dealers are in competition every day with other markets such as the furniture and electronic businesses. Those industries have traditionally used credit as a closing tool. During the national Shaw and Mohawk sales there are benefits for everyone—longer payback periods for the consumers and finance rate buydowns for the dealers.”

Financing options are also often made more accessible through various buying groups, including Flooring America. “The financing cost is negotiated by [group management] for Classique Floors, which makes it very appealing us,” said Judith Huck, owner, Classique Floors, Portland, Ore. “We also want our customers to be able to purchase from us any way they want.”

It is also important to note that credit programs can be an added bonus for retailers whether or not they have a large number of customers looking for financial solutions. Just ask Deb DeGraaf, co-owner, DeGraaf Interiors, Grand Rapids, Mich., who continues to offer these solutions despite having a low number of consumers requesting credit. “We offer credit all year long and always have a 12-month, no-interest credit option available. We’ll advertise it pretty heavily when there are sales going on with Shaw and Mohawk, and we’ll have on average five to eight customers per sale period take advantage of it.”

For DeGraaf, credit is a necessity for her business because it’s available in other competing industries. “By offering credit your ticket price goes up and it makes it more affordable for customers to spread out the payments.”

One crucial point about offering credit is fully disclosing the cost of financing to the customer. As Henry’s Miller explains: “We’re upfront with our customers that there is a cost to using financing, and most are already aware of that fact.”

Talking to customers about credit and interest rates is part of best practices among most retailers. The retail sales associates at Abbey Carpets Unlimited, Napa, Calif., make sure customers are aware of the high interest charges associated with not paying off the purchase in the allotted time. “This heavy interest could be a negative if you don’t make sure your clients understand the results of not paying it off in full in the time frame of the contract,” said Janice Clifton, owner.

In addition to explaining the terms of a credit card, some flooring dealers require customers to make a specific down payment. For example, Classique Floors requires its customers to pay 10% to 25% down depending on the length of the financing chosen.

Retailers can also take advantage of credit opportunities regardless of their store’s location. For example, Abbey Carpets Unlimited is in a more affluent area yet still has customers who are interested in opening a flooring credit card. “On a fairly regular basis, a customer will choose the financing option, and this often enables her to upgrade her flooring choice or do more areas than she originally intended,” Clifton explained. “Our funding source provides us with the interest-free financing for a discounted rate not too much larger than the upgraded credit cards our customers would normally use. For our store, it provides us with a way to complete a sale that may be more than the consumer is ready to spend right now.”

For dealers like Mark Hayden, Carpet One Floor & Home, broaching the subject of credit and financing options frequently throughout the sales process is key to persuading the consumer to make a larger purchase than she initially planned. “Bring it up at the origin of the discussion when you start working with your customers, and bring it up another time during your conversation,” he explained. “Sometimes telling something to someone a few times will make it better understood and remembered in their minds.”

Evan Blanchfield, Campbell’s Carpet in Port Washington, N.Y., employs a similar strategy. “Let the customer know [credit] is available early on because then you can probably get a bigger purchase if something is out of her budget,” he said. “If your consumers know financing options are available from the start they know it’s within their reach.”

Some dealers look to influence the customer long before she enters the store. Carpetime in Grand Junction, Colo., for example, utilizes the web to educate shoppers about credit terms. “It’s worth mentioning [online] you offer financing that determines whether they come into the store or not. We like to let customers know it is available if that’s what they want and it’s one of the main things they are looking for.”

Jim Jensen, owner of Carpet Mill Outlet Flooring Stores, Denver, cites the importance of promoting credit opportunities through a variety of media. “We have found success with web and social promotions along with salespeople and POP materials. When you add mentions in the mass media like broadcast TV, cable and radio, we find the blanket coverage of all available media is the most effective approach.”

These are just some of the ways specialty retailers are successfully promoting credit in their stores. While the specific strategies might vary slightly from store to store, the common denominator is the sheer availability and access to retail financing options. From credit programs negotiated directly with banks and financial institutions to those offered in conjunction with manufacturers, there is no shortage of choices for specialty dealers.

Communicating this availability of financing consistently across all marketing channels is key to building greater awareness among flooring shoppers, experts say. This includes using promotional vehicles that fall outside of traditional mediums. “Using Facebook, websites, radio, mailers, banners, TV and newspaper advertising to promote our branding shows our customers we are consistent with our ability to finance effectively,” Tom Garvey, president and CEO of Lewisburg, Pa.-based Garvey’s Flooring America, told FCNews. He estimates approximately 30% of sales are generated from purchases financed over a 12-to-24-month time frame.

Consumer research supports the relationship between active promotional credit initiatives and big-ticket purchases achieved via financing. For instance, the findings of a recent survey conducted by Synchrony Financial—which offers credit programs for retailers and consumers alike—show 65% of respondents in the flooring category “always” seek promotional financing options when making a major purchase, while 72% indicated promotional financing makes large purchases more affordable.

Despite these numbers, experts say there is room for improvement. That same study revealed 32% of flooring shoppers who are not Synchrony Bank cardholders reported awareness of financing options compared to 58% last year. According to Glenn Marino, Synchrony executive vice president and CEO, payment solutions, this means retailers need to do better at integrating credit information across multiple channels.

The good news for retailers is consumers are indeed actively seeking ways to finance their flooring purchases. According to Synchrony Financial, roughly two-thirds of flooring shoppers conduct research through search engines, the retailer’s website and manufacturer sites. Another 34% also leverage third-party online review sites. “Integrated campaigns across email communication and retail site advertising also reinforce dealer participation and broader brand messages to help build incremental awareness among consumers,” Marino explained.

When Sam Chesher, owner of Carpet Wise Flooring America in Longmont, Colo., first joined the flooring industry, he was shocked at the resistance to offer financing; his previous field embraced the concept wholeheartedly.

Today, Chesher said he makes credit financing a major component of his selling strategy. “Rule No. 1 is you must mention financing early and often during the sales process. Most of the time you will be told ‘no’ at first.”

Just last month Chesher met with a customer who had a $1,500 budget for a job that had been measured by a big box store. “She did not seem interested in financing,” he said.

Undeterred, he discussed the quality difference between samples and started the cushion selection process by introducing Tempur-Pedic—a high-priced pad option. “Once again I mentioned financing. As we moved forward with the sales process and she asked the dreaded ‘How much?’ question—we charge $2,500—I once again mentioned that she could have 18 months, 0% interest, and she agreed to it. She was approved for $1,500, and she will write a check for the balance at the time of installation.”

Chesher said he did not lower any prices on the customer’s order. “By being closed minded about financing, most dealers would have had no choice but to lower the pad and lower their margin, maybe getting the order to $1,800, and then complain about how they can’t compete with a box center and, more embarrassing, how they can’t sell upgraded padding, or that only cheap pad was in the customer’s budget.”

Consumers do not only spend more when they finance their purchases, but they are also more likely to return to the same store for future purchases, studies have shown.

For flooring dealers still unsure or wary of the process, there is help out there. In flooring, Synchrony Financial, formerly GE Capital, provides financing for Mohawk, Shaw, Carpet One, Flooring America and others. Mohawk, a long-time partner of GE Capital, offers its retailers a private-label, store-branded card that is a separate line of credit for the cardholder. This card allows the customer to pay for her flooring over a period of time—from one to four years, for example.

Mike Zoellner, vice president of marketing services at Mohawk, said the company negotiates special low rates for MasterCard and Visa processing with Chase Paymentech. “Most retailers just pay for MasterCard and/or Visa processing through their local banks and consider it an operating expense. If we can save a retailer 1% in fees, that goes straight to their bottom line as profit. All these benefits include supporting in-store merchandising and POS-like signage, special offers coordinated with Mohawk sales and kiosks through our partner, Versatile.”

Zoellner added that Mohawk provides its retailers the opportunity to offer extended financing to their customers on any product in their stores, extending to non-Mohawk branded products. A retailer that buys from Mohawk can also take advantage of the same promotional offers at a discount. “In addition, we occasionally offer rate buy-downs on the purchase of Mohawk-branded product,” he said. “This further lowers the net rate retailers are paying for the extended financing offer, oftentimes below the rate they pay to process MasterCard, Visa or American Express.”

Why is this important? Because these programs benefit retailers by helping them compete in their local markets, at competitive rates that are usually only available to large chains and home centers. In effect, these rates level the playing field by allowing retailers to advertise and promote at the same level as the larger home centers.

“Our programs are differentiated from others in the market because of the initial discounted rates paid by the retailer,” Zoellner said. “In addition, the number of customers who get approved in-store is higher due to our partnership with Synchrony Financial. We believe the rates Mohawk retailers receive from Synchrony are superior overall to any other national program or bank offering.”

The partnership with Synchrony and Chase goes well beyond discount and approval rates. Between the Synchrony Business Center and Mohawk University’s training program, there are many opportunities for dealers to learn how to sell with credit and successfully advertise their current credit incentives.

In its research, Synchrony has found flooring shoppers spend an average of 102 days researching their purchases, and 78% of these buyers begin the research process online.

“For the third consecutive year, our Major Purchase Consumer Study has tracked the importance of digital tools and the role of financing in making a major purchase,” said Ronda Slaven, senior manager of research and analytics for Synchrony Financial. “Financing plays a critical role in driving choice of retailer and delivering value, as indicated by the 76% of cardholders surveyed, stating they ‘always seek promotional financing options’ when making a major purchase, and 56% would choose another retailer or not make the purchase if promotional financing was not available. This is especially true in flooring, where 81% of cardholders ‘always seek promotional financing.’”

During the 2014 fall promotional period, Shaw Floors said it is equipping its dealers with what it calls “the tools necessary to succeed,” including promotions focusing on consumer credit. “Many stores in like-category merchandise, such as furniture and specialty paint stores, offer consumer financing to their customers,” said Heather Yamada, director of national advertising and consumer merchandising for Shaw Floors. “In fact, for most large purchases, consumer financing is available. This allows consumers to purchase bigger-ticket items with the ease of smaller payments.”

Yamada said special financing might enable consumers to upgrade to higher quality items if they can pay it off in smaller amounts. “Financing promotions are especially great for those who are doing a total renovation to their homes, or young couples making their first flooring purchase. We have seen higher dealer participation with a finance-focused program and have heard positive feedback from our dealers.”

Not all flooring dealers fully embrace consumer financing, in some cases because they are in an affluent market where credit purchases aren’t as necessary; others may not want to invest the time and effort. But for those who do see the benefits, the rewards are bountiful.

Ed Cross, owner of Ed’s Flooring America in Plaistow, N.H., is one retailer who understands the value of financing, and he makes sure every customer who walks into his store sees the various offers through in-store signage and web advertising. “Customers are already aware of [financing options],” Cross said. “We try and talk about it in the beginning of the sales process. When we do that right, we have better success.”

In his store, 18-month terms work best because customers tend to buy more often and spend more.

“When we look at our finance purchase vs. non-finance purchase, it is about double the ticket,” said Keith Spano, president of Flooring America. “People will buy more or buy better product when consumer financing is introduced.”

Last month, Flooring America brought down the rate dealers pay to less than that of a Visa or MasterCard. The result was a 20% pickup in sales in one month. “We think we are onto something,” Spano said. “We talk about credit early and often in the sales process; it makes the sale easy for the salesperson.”

While many flooring dealers advertise their promotions in-store and online, few are as bold in their messaging as Miami-based Dolphin Carpet & Tile, a National Floorcovering Alliance dealer, which declared in a recent full-page ad: “Never before has any flooring company offered financing this outrageous.” The offer read: “Buy two rooms of quality installed flooring for as little as $15 per month (up to 350 square feet),” as well as “Buy a whole house of quality installed flooring for as little as $59 per month,” based on at least 1,400 square feet.